2010 (4) TMI 317 - AT - Central Excise

Refund- unjust enrichment- The assessee was paying duty on their final products on the basis of provisional assessments. In the show-cause notice, it was alleged that the party had contravened the provisions of Rule 9B(5) and Rule 9(1) read with Rule 173G(1) of the Central Excise Rules, 1944 The proposals in the notice were contested. In adjudication of the dispute, the original authority held that the assessee s action of having taken suo motu credit was illegal and, therefore, they should pay back the entire amount with interest @ 20% p.a. The appeal filed by the assessee against the order-in-original was allowed by the Commissioner (Appeals). Hence the present appeal of the department. Held that- where the assessing authority in its order of finalisation of provisional assessment does not expressly permit the assessee to have the benefit of refund by way of credit in PLA/MODVAT account, the assessee would be justified in having this benefit by way of sue motu credit in these accounts. This is what was done by the assessee in the present case. In any case, what was done by the assessee has not been shown to be prejudicial to the Revenue. In the result, this appeal filed by the Revenue is dismissed .

Issues Involved:
1. Provisional assessments and finalization of duty.
2. Suo motu credit of excess duty paid.
3. Applicability of the doctrine of unjust enrichment.
4. Requirement of claiming refund under Section 11B of the Central Excise Act.
5. Interpretation of relevant case law and amendments.

Detailed Analysis:

1. Provisional Assessments and Finalization of Duty:
During the period from April 1995 to March 1997, the assessee was paying duty on their final products based on provisional assessments. The Assistant Commissioner approved the pricelists on 17-6-1999, allowing higher PME (Post-Manufacture Expenses) deductions for 1995-96 and 1996-97. Consequently, the Superintendent finalized the assessments and communicated the excess duty amounts to the assessee on 21-6-1999.

2. Suo Motu Credit of Excess Duty Paid:
Upon receiving the intimation, the assessee took credit of the excess duty in their PLA (account current) on 22-6-1999. The department issued a show-cause notice on 5-10-1999, alleging that the assessee contravened Rule 9B(5) and Rule 9(1) read with Rule 173G(1) of the Central Excise Rules, 1944, by taking suo motu credit without proper authorization. The original authority deemed the action illegal, requiring the assessee to repay the amount with 20% interest per annum. However, the Commissioner (Appeals) allowed the assessee's appeal, leading to the department's present appeal.

3. Applicability of the Doctrine of Unjust Enrichment:
The department contended that the assessee should file a refund claim under Section 11B and prove that the excess duty incidence was not passed on to any other person, invoking the doctrine of unjust enrichment. The assessee argued that this doctrine was not applicable to refunds arising from the finalization of provisional assessments.

4. Requirement of Claiming Refund under Section 11B of the Central Excise Act:
The Tribunal referred to several Supreme Court and High Court decisions, including Mafatlal Industries Ltd. (1997), TVS Suzuki Ltd. (2003), and Allied Photographics India Ltd. (2004), which held that refunds arising from the finalization of provisional assessments under Rule 9B were not governed by Section 11B. The Tribunal noted that the proviso introduced in sub-rule (5) of Rule 9B on 25-6-1999 required refunds to be claimed under Section 11B, applying the doctrine of unjust enrichment only for assessments finalized after this date.

5. Interpretation of Relevant Case Law and Amendments:
The Tribunal analyzed various cases, including Oriental Exports (2001), Standard Drum & Barrel Mfg. Co. (2006), and United Spirits Ltd. (2009), to determine the applicability of the doctrine of unjust enrichment. It concluded that refunds arising from provisional assessments finalized before 25-6-1999 were not subject to Section 11B or the doctrine of unjust enrichment. The Tribunal also distinguished between cases where suo motu credit was permissible, citing ITI Ltd. (2005) and rejecting the applicability of BDH Industries (2008) to the present case.

Conclusion:
The Tribunal held that the assessee was entitled to the refund of excess duty paid due to the finalization of provisional assessments before 25-6-1999 without the bar of unjust enrichment. It was permissible for the assessee to take suo motu credit of the excess duty in their PLA, as it was not shown to be prejudicial to the Revenue. Consequently, the appeal filed by the Revenue was dismissed.

← Previous Next →